COURT FILE NO.: CV-10-1615-00
DATE: 20180514
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
KULDIP S. CHAGGAR
Satwant S. Merwar, for the Plaintiff
Plaintiff
- and -
JOOSIK CAISON LEE a.k.a. CAISON JOOSIK LEE a.k.a. CAISON J.S. LEE, SMITH & BROOKS CORPORATION a.k.a. SMITH BROOKS CORPORATION and 2069615 ONTARIO INC. a.k.a. SMITH & BROOKS SERVICES INC. a.k.a. SMITH BROOKS SERVICES INC., and HEASUN LIM
No one appearing on behalf of the Defendants, after having been noted in default
Defendants
HEARD: May 10, 2018 at Brampton
REASONS FOR JUDGMENT
Justice F. Dawson
[1] This is a motion for judgment pursuant to Rule 19 based on the default of the defendants. The motion is supported by three affidavits and numerous exhibits. The background facts are not straightforward, but after reviewing all of the material I am satisfied that judgment should issue in accordance with the relief sought in the ex parte notice of motion returnable May 10, 2018.
[2] Due to the nature of the claim and the amount of money involved I will briefly explain the basis on which I have reached this conclusion. First, I will set out some of the factual background. I will not review all of the relevant evidence but will focus on a chronological review that frames the issues.
Factual Background
[3] The plaintiff loaned money to Joosik Lee and the corporate defendants. Heasun Lim is Joosik Lee’s wife. She is named as a defendant primarily because a residential property was conveyed to her after default on the loans and prior to a consumer proposal made by Joosik Lee pursuant to the Bankruptcy and Insolvency Act. That consumer proposal was later set aside by the court, thereby lifting the stay of proceedings that had prevented the plaintiff from obtaining judgment against Joosik Lee. I will now situate some of the relevant events along the timeline.
[4] Three loans were made to Mr. Lee and the corporate defendants as follows: March 26, 2008 - $30,000; April 6, 2008 - $30,000; May 29, 2008 - $25,000. The evidence establishes that these were contemplated to be short term loans and they were at a high rate of interest. Details are contained in the evidence, but it appears that the effective annual interest rate comes to approximately 25.5%.
[5] The evidence establishes that there was default from the outset. Nothing has ever been paid under the loans. After default Mr. Lee and the corporate defendants acknowledged liability for the loans and entered into a further agreement with the plaintiff on June 17, 2009. It appears that one purpose of the agreement was to cap the amount owing at a specified sum if security, as described in the agreement, was provided. The evidence establishes the security was not provided. The agreement indicated that if it was not adhered to interest would continue to accumulate on the monies owed.
[6] Some litigation took place in British Columbia in 2009, the details of which are set out in the affidavit material. However, I will maintain focus on the Ontario action that leads to this motion.
[7] On April 28, 2010 the statement of claim in this action was issued. The defendants were served in May 2010. A notice of intent to defend was served on May 26, 2010. However, no statement of defence was ever filed.
[8] On June 24, 2011 the plaintiff obtained a default judgment against the corporate defendants in the amount of $267,089. That judgment was obtained from Ricchetti J. on June 24, 2011 pursuant to a motion similar to this one. Ricchetti J. also gave a declaration that the conveyance of the residential property at 6 Darwin Court, Richmond Hill, Ontario, challenged in the statement of claim, was a fraudulent conveyance and void as against the plaintiff.
[9] No default judgment was obtained against Joosik Lee due to a stay of proceedings against him that arose from a consumer proposal dated March 17, 2010 pursuant to the Bankruptcy and Insolvency Act.
[10] The default judgment just referred to was set aside pursuant to an order dated April 24, 2012. Affidavit material filed by the defendants on the motion to set aside demonstrated that some documents that post-dated the notice of intent to defend had been sent to the wrong address. Although the affidavit material indicated a defence would be filed, that never occurred. On September 27, 2012 those defendants were again noted in default. Default judgment for the liquidated portion of the claim issued against those defendants, by then in the amount of $467,909 due to accumulating interest.
[11] It should be noted that the plaintiff filed a complaint with the Superintendent in Bankruptcy in respect of the trustee’s handling of Mr. Lee’s consumer proposal. I will not refer to all of the related details. During the course of those proceedings Mr. Lee was examined under oath about the transfer of the Richmond Hill property to his wife Heasun Lim, about the nature of his relationship with his wife and about whether he was merely an employee. Mr. Lee contended that he was separated from his wife although they still lived in the same house. The contention was that she was now the president and operator of one of the corporate defendants and that Mr. Lee was a salaried employee of the company, working as a janitor.
[12] I note in passing that the Superintendent in Bankruptcy made a report about these matters and directed the trustee to undertake a further investigation. That did not happen and the plaintiff went to court on March 26, 2015 to obtain an order annulling Mr. Lee’s consumer proposal. On November 16, 2016 Master M. Jean released reasons explaining why that relief should be granted. The consumer proposal was set aside and the stay of proceedings was lifted.
[13] Repeated requests by the plaintiff that a statement of defence be filed went unanswered. On June 30, 2017 Mr. Lee was noted in default. Ms. Lim had previously been noted in default.
[14] This tortuous background brings me to the issues to be decided on this motion.
The Liquidated Claim
[15] The plaintiff seeks judgment against Joosik Caison Lee, a.k.a. Caison Joosik Lee, a.k.a. Caison J.S. Lee in the amount of $2,162,196.00. After pressing counsel for the plaintiff to demonstrate how loans totaling $85,000 could lead to judgment for such a sizeable amount, I was referred to schedules prepared by two accounting firms that are contained in the affidavit material. Upon careful examination these documents, considered together, demonstrate that the calculation is correct. The basis for the calculations is apparent from the documents and consistent with the loan agreement and the allegations in the statement of claim. Those factual allegations are now deemed to be admitted as Mr. Lee has been noted in default: Rule 19.02(1)(a).
[16] I observe that the plaintiff does not seek to enforce a penalty provision in the loan agreement that would further increase the amount owing. I also mention that the interest on these loans has been accumulating for over 10 years.
[17] On the basis of the affidavit evidence the agreement is clear. The now admitted factual allegations contained in the statement of claim are also clear. Both support the calculation in question. The plaintiff should have judgment in the amount specified above against Mr. Lee.
The Unliquidated Claim to Set Aside the Conveyance of the Richmond Hill Property to Heasun Lim
[18] There is both direct and circumstantial evidence to support the conclusion that the transfer of the property in question amounts to a fraudulent conveyance which should be set aside.
[19] The direct evidence flows from the deemed admission of factual allegations contained in the statement of claim. At paras. 16 to 18 of the statement of claim the plaintiff alleged that at the time of the three loans Mr. Lee was the sole owner of the property, and that it was transferred to Heasun Lim for no or nominal consideration pursuant to Instrument Number YR1277801 registered on January 16, 2009. Most significantly, the plaintiff pleaded that the conveyance was made “with the intent of defeating, hindering, delaying or defrauding the plaintiff of its lawful right to realize upon the property in satisfaction of the debts owed to it…”
[20] These factual allegations are deemed to be admitted by both Mr. Lee and Ms. Lim. They are sufficient to support the setting aside of the conveyance in question.
[21] There is also additional circumstantial evidence contained in the record before me. Exhibit M to the affidavit of Kuldip Chaggar, sworn February 20, 2015, is the examination of Mr. Lee under oath by the Official Receiver. While Mr. Lee did not admit outright that the conveyance was fraudulent, he admitted to many background facts. Taken together and evaluated in the context of all of the other evidence in the record, those facts support an inference on a balance of probabilities that the conveyance was made with the intent to defeat creditors. The circumstances indicate that Mr. Lee transferred the home after receiving advice from a debt counsellor and, collectively, the answers support the inference, in the context of the other evidence, that it was part of his plan to delay matters and hold out making his consumer proposal until after the one year period from the date of the transfer, during which a presumption of invalidity would apply, had expired.
[22] There are many suspicious circumstances. Unanswered, they lead me to infer that the purpose of the transfer was calculated to defeat creditors. Taken together with the deemed admission of an intent to defraud which flows from failure to respond to the statement of claim, proof of a fraudulent intent rises far above proof on a balance of probabilities.
[23] I am well satisfied that this conveyance should be set aside.
Conclusion
[24] For the foregoing reasons, I have signed the draft judgment provided on the hearing of the motion.
Costs
[25] I have been provided with a bill of costs which, given the overall nature of the proceedings, I find to be quite reasonable. As my reasons demonstrate, there have been many moving parts to this proceeding. Extensive material had to be prepared to assist the court. A fraudulent conveyance has been established.
[26] The total costs on a full recovery basis, including taxes and disbursements come to $23,632.38. Counsel for the plaintiff suggests that $1,000 in costs be ordered against Heasun Lim, and that the balance be ordered against Mr. Lee. That is my order in this case. Costs on a full recovery basis are appropriate due to the delaying tactics, fraudulent activity and bad faith displayed by the defendants.
Justice F. Dawson
Released: May 14, 2018
COURT FILE NO.: CV-10-1615-00
DATE: 20180514
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
KULDIP S. CHAGGAR
- and –
JOOSIK CAISON LEE a.k.a. CAISON JOOSIK LEE a.k.a. CAISON J.S. LEE, SMITH & BROOKS CORPORATION a.k.a. SMITH BROOKS CORPORATION and 2069615 ONTARIO INC. a.k.a. SMITH & BROOKS SERVICES INC. a.k.a. SMITH BROOKS SERVICES INC., and HEASUN LIM
REASONS FOR JUDGMENT
Justice F. Dawson
Released: May 14, 2018